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Advertiser Sponsored Report: Optimas Winners: A Study in Benefits

ompanies across the nation have a tough pill to swallow as they face soaring health-care insurance costs. HR managers are taking a strategic approach to the situation in order to soften the financial impact on their staffs and their organizations. “We have been very concerned about escalating cost,” says Kelly Jenkins, managing director, employee benefits and health communications, for FedEx Corp. “We’ve done a number of things to inject consumerism into our health plan.” Increased flexibility and choice in health-care benefits has helped enterprises like FedEx cope with the changing health-care environment.

Businesses of all sizes are faced with increases in employer-sponsored health insurance costs that far exceed inflation rates. Health-care premiums rose an average of 13.9% between 2002 and 2003, according to a study published by the Kaiser Family Foundation, a nonprofit research group based inMenlo Park, California. And the price of patient care continues to climb, thanks to rising costs for hospital care and drugs, increased use of medical care and insurers' push for higher profits. Patient demand for less restrictive managed care has also contributed to the health-care price hike. As employers shift much of the burden to employees, many benefits managers are designing programs to balance employee satisfaction with bottom-line objectives.

Firms diminish bottom-line blow

Research by Mercer Human Resource Consulting found that 30% of employers held their per-employee health benefit cost constant or even reduced it from 2002 to 2003. This was possible because of a spike in worker contributions, especially in family coverage. Only a few firms still pay the full premiums for family coverage, a marked decrease since the 1980s.

“Last year's brutal rate hikes compelled many employers to take serious steps to cut costs -- changing plan design, reducing covered services, dropping costly plans,” according to the Mercer report. The average amount that workers pay toward their premium for family coverage rose almost 50% from 2000 to 2003, from an average of $1,619 a year to $2,412.

The Kaiser report, “Employer Health Benefits,” showed that a significant percentage of companies changed health-care plans within the survey year. “There are significant indications of employer interest in alternative approaches to health-benefit design,” states the study summary. One way that employers are offsetting higher payroll deductions is by allowing employees to take a more active role in choosing their own health-care plans and where they spend their health-care dollars.

Here is how two previous winners of the Optimas Award have dealt with rising health-care costs.